The following OECD assessment and recommendations summarise Chapter 5 of the Economic Survey of Ireland 2006 published on 2 March 2006.
Soaring activity and a rapidly growing population have created an infrastructure deficit that is constraining productivity growth. Major pressure is evident especially in the areas of transport, electricity transmission, landfill, waste water treatment and broadband internet. Insufficient investment in environmental infrastructure has led to pollution and soaring prices for some services such as landfill. The government has responded with a substantial infrastructure programme: public investment is expected to average 5% of national income for the next decade.
The stock of public capital is low
Per person in thousand $, latest year available1
1. At 1995 prices, using 2000 purchasing power parities. Data cover 2004 for Ireland, 2000 for other countries.
Source: OECD (2005), Economic Outlook 78 database and Kemps, C. (2004), “New Estimates of Government Net Capital Stocks for 22 OECD Countries: 1960-2001”, IMF Working Paper, No. 67, International Monetary Fund, Washington DC, April.
Rigorous cost-benefit analysis of infrastructure projects, including those in the ten-year transport plan, should play a greater role in decision-making than has been the case in the past. From now on, the marginal benefits of new projects are likely to become smaller and will need to be traded off against the other demands on the public purse. The Capital Appraisal Guidelines require a cost benefit analysis for projects above €30 million and this requirement should be rigorously enforced. They allow exceptions in cases where benefits are “too difficult” to quantify; this exemption should be used to a minimum. It would also be worth creating a central oversight and appraisal unit, taking on board the lessons other countries have learned from their public-private partnership programmes. Delays in the planning system should be reduced. Finally, many of the projects should be financed by users. The success with waste management charges could be extended to areas such as water treatment and road pricing. Indeed, Dublin would be an ideal candidate for an inner-city congestion charge once the public transport network has been upgraded.
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Return to the Economic Survey of Ireland 2006
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