Addressing Corruption Risks in the Infrastructure Sector

The G20’s Global Infrastructure Outlook projects that the world is on track for $79 trillion in infrastructure spending by 2040, with an additional $15 trillion needs gap. That volume of funds gives rise to an elevated corruption risk, requiring accountability and oversight. Against that backdrop, CoST, the Infrastructure Transparency Initiative, founded in 2012 after a three-year pilot, uses an approach blending: government, private sector and civil society engagement; data publication; independent projects reviews; and media, civil society and academia support. CoST estimates that it has helped a wide range of countries save millions of dollars. To better understand CoST’s work, I spoke recently with Programme Director John Hawkins.

CoST’s core tool is the Open Contracting for Infrastructure Data Standard, developed jointly with the Open Contracting Partnership. Governments commit to publishing data using this standard when joining CoST as a member. Another tool is the Infrastructure Transparency Index, an idea which took some time to develop, and is crucial because, as Hawkins put it, “pass/fail doesn't work in the infrastructure sector.” The Index, with data on 10 countries, reviews the “enabling environment, capacities and processes, citizen participation, and data publication,” allowing to assess the transparency of a country’s infrastructure sector, and guide stakeholder collaboration to raise standards.

I asked about China’s role in infrastructure globally. In Hawkins’ view, the US and its allies came late to the emerging markets infrastructure game, while China established strong local links well over 20 years ago. Governments were focused on getting the lowest price; Western firms couldn’t compete and multilateral development banks were considered slow. Hawkins notes that initially, Chinese-financed projects were often low quality, corruption reportedly widespread, and environmental and labor compliance substandard, with well-documented cases. But, Hawkins says, the reality has been shifting, noting “They may be imperfect, but Chinese-funded urban transport systems, rail networks and highways are changing cities across Africa and spurring new forms of competition,” citing expanded engagement in Uganda by Japan and Korea.

I asked Hawkins whether it is possible to identify which infrastructure sub-sectors are most and least transparent. He pointed to roads and transport as an area where, despite problems, financial information is widely available, and many multilaterals have embedded monitoring units inside the cognizant government agencies. He shared that the water sector is more difficult, because the ownership and service delivery models can vary, and smaller government agencies have lower monitoring capacity. He pointed to the challenges posed by the scope, complexity and ownership of projects in the energy sector. In his view, in sectors with only one agency or ministry in charge, it is easier to assess and advance transparency.

Overall, Hawkins thinks transparency is taken into account too late in the project lifecycle. Acknowledging the world’s infrastructure needs, he says transparency and speed need to be integrated, and that stronger budgetary systems and public financial management can reduce infrastructure corruption and eliminate white elephants. He would like the debt transparency movement to shine a light on infrastructure loans. He pointed out that where infrastructure investment is considered foreign aid, it often bypasses local procurement regulations, thus limiting transparency. Finally, Hawkins sees great promise for promoting transparency in sustainable infrastructure through the above-mentioned new data points in the Open Contracting for Infrastructure Data Standards. He also believes that the G20 Principles for Quality Infrastructure, driven by Japan, as well as the OECD-hosted Blue Dot Network, can help to raise the standard of infrastructure transparency.

Marc Schleifer

Governance, Democracy and Economic Development Expert