03 September 2012

Aid for Infrastructure in Fragile States

This is a guest post by Maham Farhat from OPM.

Development sometimes feel like a bit of a catch- 22. Economic growth requires decent "institutions" and political stability, but in many ways good institutions require a decent level of economic development to begin with. Nowhere is this more relevant in aid policy than large scale infrastructure development. Infrastructure projects have the potential to spur development through crucial inputs such as employment, connectivity and capacity building. But mismanaged they can do more harm than good, by fuelling corruption and environmental degradation. 

A recent report published by OPM and Mott MacDonald (funded by DFID) looks at donor engagement in infrastructure development in Fragile and conflicted affected states (FCAS). The findings of the report are striking. Donor engagement in FCAS is patchy on following the recommended OECD principles and there is surprisingly little hard evidence to support the notion that infrastructure development results in peace building and stabilisation. Or for that matter even simple and much trumpeted outcomes like employment generation are supported by little hard evidence. 

Existing evidence seems to suggest that "Quick Impact Projects" as implemented in Iraq and Afghanistan have a questionable record of achievement whereas community driven development projects have been shown to produce more lasting results in terms of encouraging peace and stability in local communities. Private investment can work wonders in sectors like power and telecom, a case in point being the rapidly developing telecommunication sector in Afghanistan, but attracting large scale private investment is difficult in the transport and water sectors where returns to investment are realised at a much later stage. A mix of case studies on South Sudan, Afghanistan, Nepal and Congo demonstrates that the effectiveness of donor aid in the infrastructure sector is highly dependent on country context. This is not to argue that infrastructure investment should be dumped by donors, just that much more evidence is needed to evaluate what works and what doesn't.

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