PFM Board
Medium Term Expenditure Framework => Public Investment Management => Topic started by: petagny on March 10, 2014, 14:27:45 GMT
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After a long lull, there has been an increase in investment in large dams in recent years, but there are risks. This FT article summarises more work by Bent Flyvberg and colleagues on optimism bias, this time with respect to large dams:
The study found that 'large dam construction costs were on average more than 90 per cent higher than initial budgets, while eight out of 10 suffered a schedule over-run.' This is based on a sample of 245 dams, in 65 countries since 1934.
http://www.ft.com/cms/s/0/effcd742-a82f-11e3-8ce1-00144feab7de.html#axzz2vS6ejRud
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The BBC picked it up with more pictures as it got into the Magazine section
http://www.bbc.com/news/magazine-26512465
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The BBC article is more interesting and wide ranging than the FT one.
The multi-functional nature of dams - irrigation, flood protection, power generation - is often rolled out in justification. It's often difficult to balance these competing demands though. For example, demand for power might not coincide with farmers' demands for water.
When will people realise that labour employed in constructing major infrastructure projects is a cost not a benefit! - see comment from Andy Hughes in the BBC article. The economic cost may be lower than the financial cost because of labour market rigidities, unemployment, etc., but the shadow price of labour is unlikely to be zero. If employment creation is a policy objective, there are probably better ways of achieving it.