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STAREBEI programme

Effectiveness of Infrastructure Project Investments in Africa

The STAREBEI Programme supports the joint interests of University Centres and EIB staff through the sponsorship of junior researchers interested in carrying out research projects proposed by the Bank under the joint supervision of a University tutor and an EIB tutor.

This synergy between the academic world and the Bank's professionals should provide a rich experience for young researchers and produce outputs contributing to the know-how of both the Bank and Academia.

Learn more about "STAREBEI".

SandraBlagojevic

Sandra Damijan, a PhD student and a Researcher at the Faculty of Economics, University of Ljubljana.

Research aims and contribution

Infrastructure project investments have a direct impact on economic growth and employment, enhance institutional advancement and the quality of life. Investments in infrastructure, such as roads, railways and energy, have large positive effects on the production capacities of developing economies depending on the regional peculiarity. Moreover, infrastructural investments induce the integration of markets that were regionally and functionally separated before and thereby stimulate economic growth. There are also further socio-economic impacts, including accessibility, level and location of employment, improved environment and increased efficiency that will contribute to the regeneration of a particular region (OECD, 2002). Hence, improved access to basic infrastructure contributes positively to overall capacity building of regions and whole economies.

Nevertheless, such infrastructure investments may cause inefficiency if there is miss-allocation of funds and high levels of corruption. A low-end estimate suggests that the financial costs of corruption in infrastructure investment in developing countries might equal to $18bn per year (Kenny, 2006). For example, 25 percent of electricity production is lost due to illegal connections in India, as much as 24 percent of funds destined for road construction in a project in Indonesia 'went missing' and 7 percent of government contract values are paid in bribes according to survey respondents in Eastern Europe and Central Asia (Kenny, 2006). In other words, a substantial fraction of the invested money into infrastructure projects may be lost due to high-level corruption and/or mismanagement of the projects due to poor standards or low institutional capacities in developing countries.

The research aims at exploring empirically the relationship between infrastructure projects investment and overall macroeconomic performance for African countries. Expected contribution of the proposed research is twofold. Expected contribution of the proposed research is twofold.

In the first step, there will be a short overview of the existing infrastructure project investments in African countries in the past decades and of their contribution to the overall capacity building in African countries. This overview will be used to understand the importance of infrastructure investments for overall infrastructure capacity building in these countries.

In the second step, there will be empirical study of the effectiveness of infrastructure investments of African countries in terms of overall macroeconomic growth, employment creation, and infrastructure capacity building for the period 1990 - 2010. Moreover, we will investigate how much does foreign (co-)financing of infrastructure project investments and overall institutional advancement of individual countries contribute to the overall effectiveness of infrastructure investments of African countries. The prior is that countries with more advanced institutional systems and countries that apply foreign private or institutional financing of infrastructure projects will more likely gain higher direct benefits and higher socio-economic spillovers.


RESEARCHER: MSc. Sandra Damijan
FELU TUTOR: Prof. Jozef Konings
EIB CO-TUTOR: Phd. Simona Bovha Padilla

PERIOD: 7/2013-7/2014

The research project is supported by the European Investment Bank, funded under the STAREBEI programme for financing of University research, which we gratefully acknowledge.

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