Abstract
The Sri Lankan Government spends a significant share of its capital budget on road infrastructure. Therefore, it is important to ensure the efficiency of capital deployment in road sector projects. This research was undertaken with the objective of assessing capital efficacy in road development. In addition, the research sought to appraise strategies adopted in the institutionalisation of an appropriate public investment management mechanism, such that the maximum possible economic gain could be obtained. Road projects undertaken by the Road Development Authority of Sri Lanka over the period 2005-2012, covering an overwhelmingly large share of public spending on road sector, were examined. The indicator used as the inverse of capital efficacy was the real capital expenditure intensity per unit of surface area, which was regressed against a selected set of cost-influencing factors, whereby significant determinants of capital intensity were identified. Project size, class of road, nature of terrain, funding mechanism and contract procurement process emerged as significant determinants with their influence being exerted in the expected direction, while the surface technology and the type of contractor were not significant. It was found that to fund projects through bilateral credit tied to contractors domiciled in lender countries without competitive bidding was highly capital intensive, and therefore inefficient, in terms of capital deployment. The outcomes of the study recommend that public investments should be executed through local contractors to the maximum possible extent, and that, whenever foreign funding becomes necessary, contract negotiation with a pre-designated company without competitive bidding should be avoided, given that such a modality would be prone to wastage, leakages, mismanagement, and corruption. It is strongly recommended to institutionalise a competitive procurement process through an effective mechanism for public investment planning, appraisal, and implementation management, to ensure the efficiency of public sector capital expenditure.
Highlights
The Sri Lankan Government spends a significant portion of its annual capital expenditure on road infrastructure development
A considerable portion of capital resources voted for Provincial Councils, which amounts to nearly one-third of what was received by the Road Development Authority (RDA), have been invested in developing road infrastructure
While the economic plough-back effect could lead to economic benefits from such additional expenditure if it takes place domestically, any such additional expenditure made on imports or on foreign construction contracts would constitute a net leakage out from the national economy
Summary
The Sri Lankan Government spends a significant portion of its annual capital expenditure on road infrastructure development. A considerable portion of capital resources voted for Provincial Councils, which amounts to nearly one-third of what was received by the RDA, have been invested in developing road infrastructure. In this context, it is of prime importance to assess how efficiently such capital budgets allocated to the road infrastructure sector have been utilised. It is of utmost importance that capital efficacy in road development is assessed, and that strategies are implemented to realise the greatest possible economic benefits with the least possible capital outlay, through appropriate strategic planning, implementation and financing of projects
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