What Is the Value of Infrastructure Maintenance?

Public infrastructure has been established as the foundation for the productive activities of a country. Road and rail networks, water systems, power generating and distribution systems, and telecommunications are essential for an economy’s production of goods and services. Of course, it matters not only how much public infrastructure a country has, but what condition the infrastructure is in. In this paper presented by Felix Rioja at Lincoln Institute’s 2012 Conference on Infrastructure and Land Policy the author explores the funding, construction, condition, and maintenance of infrastructure and its impact on a country’s economy. Data on the condition of infrastructure from around the world, with particular emphasis on developing countries, is grouped and analyzed using the World Bank’s economic classification system in order to identify the value of infrastructure maintenance.

This chapter examines four main questions in an effort to survey some of the salient issues associated with infrastructure maintenance. What are the methods and expenditures necessary when establishing an effective maintenance program? What does the available data on maintenance tell us the economic rate of return on the cost of maintenance is? What has the evidence shown the effects of maintenance to be on productivity and growth? How have countries funded maintenance expenditures? In examining these issues a case study from Peru is presented which highlights an interesting and creative approach to the maintenance of rural roads.

Based on data analyzed the author concludes that an optimal level of maintenance expenditures can increase a developing country’s growth rate and that estimated rates of return for maintenance are high. Given this it is puzzling that infrastructure maintenance has been neglected in both industrialized and developing countries. A possible reason for the deterioration of existing infrastructure may be inadequate funding. The author suggests that establishing second-generation funds based on dedicated funding sources could help in addressing maintenance issues. These funds could be administered by independent boards authorized to decide on the proper allocation of expenditures in order to improve efficiency and transparency. In the past it has been easier for the governments of developing countries to access donor aid and concessional lending for new infrastructure construction however recently international institutions are beginning to factor future maintenance expenditures into their contributions in an effort to address this issue.

This paper was presented at the Lincoln Institute’s annual Land Policy Conference in 2012 and is Chapter 13 of the book Infrastructure and Land Policies.