Chennai: A joint faculty team from IIT Madras and Harvard University has completed a landmark study on the impact of transparency on infrastructure outcomes.
This study is a systematic analysis of the evidence from developing countries on the impact of various interventions such as reform, competition, privatization, regulation in infrastructure sector on outcomes such as access, cost, efficiency, price, and quality. By using transparency as a common factor that unites the interventions across different levels, this study has been able to synthesize a large body of evidence in infrastructure.
Thillai Rajan, Associate Professor, Department of Management Studies, IIT Madras was the principal investigator for this project. Other members of the team included Prof. Sudhir Chella Rajan (IIT Madras) and Profs. Akash Deep and José A Gómez-Ibáñez (Harvard University).
Key findings
In a majority of the instances, not much significant found in overall outcomes. However the number of positive outcomes was higher than negative outcomes. The surprising thing is that the largest number of evidences did not show any impact on access, cost, and quality. Status quo was maintained even after reform implementation.
It is generally felt that prices increase following reform related interventions. Our analysis indicated that more than 62% of the findings showed no significant impact on price and only 19% of the observations indicated an increase in price as a result of the intervention. It is also interesting to note that the same fraction of cases (19%) showed a decrease in price. Thus the common perception that reforms tend to increase prices may not be really true.
Reforms and changes in transparency can be introduced at three levels macro, sector, and project level. In terms of effectiveness (i.e., those that had a positive impact on outcome), it was seen that micro level interventions had the highest fraction of observations (58%) indicating a positive impact on outcome, whereas this proportion for macro and sector level was 34% and 31% respectively.
Finally, most surprisingly, analysis of the impact on different customer segments indicated that the proportion of positive outcomes for rural, poor, and illiterate segment (33%) was higher as compared to urban, rich, and literate customer segments (20%). Taking into account the type of outcomes, our analysis indicated that access and quality improved for rural, poor, and illiterate customer segment as a result of the interventions.
Main implications
Importance of governance indicators and institutions: Interventions that focus only on sector level issues are not sufficient. Interventions that strengthen governance, institutions, and reduce overall corruption are equally important to achieve the desired outcomes from infrastructure projects.
Need to continue the next stage of interventions: In a majority of the developing countries, the primary objective of sector reforms has been to attract private sector capital in infrastructure. For years, public sector capital constraints led to rationing of supply in the infrastructure sectors. Private sector investment was expected to bring in additional investment to expand capacity and network. While the initial expectations of investment have been met in most instances, it is important to implement the next stage of interventions to achieve the desired improvements in outcomes.
Explicit focus on transparency: Since improving the level of transparency is not the main objective of these interventions, transparency levels did not improve much. By specifically focusing on the transparency component while implementing these interventions, it would be possible to increase the levels of transparency in a more explicit way.
Assessment on the effectiveness of these interventions should also include criteria on how they have improved transparency levels.
Recognizing the trade-offs on different outcomes: Identification of the appropriateness of different interventions for different outcomes and sectors is also important. For example, community participation is seen as quite effective in improving project outcomes. However, it can be implemented only in limited instances.
Customizing the interventions to suit the local context: Since the outcomes of these interventions vary differently across areas, it is suggested that the interventions should be tailored to suit the context of developing countries. For example, while a complex regulatory structure with well laid procedures might suit the developed countries that have strong institutions; a simpler structure might be more appropriate for developing countries.
More information
For more details about the project and the report, please mail to :
thillair@iitm.ac.in or call 94449 26442.