During a meeting in 2018 a small group of senior consultants, everyone active in their own respective fields and working in different developing countries, started a discussion about how best to realize large infrastructural projects in developing countries around the world. Each of the participants could mention projects that were initiated but either never finished, realized with huge budget overruns or still not living up to their expectations due to poor project management, insufficient knowledge and experience of participants, using wrong materials or technology, etc. Furthermore quite often, the funding of such projects created a bigger problem for the local governments than the problem that was solved by the project itself.A plan was made to investigate if major infrastructural projects in developing countries could be realized in a more secure way for all stakeholders: funders, local government, project developers and contractors and local citizens.
Key Success Factors
The following issues are critical for the successful realization of large infrastructural projects:
a) Relation with local government
The outcome of many projects are harmed by direct or indirect influences from the local government (personal interest for decision makers, political disunity, new government is installed with a different agenda of priorities, etc.).INTINCO believes that taking away the full responsibility of one project from the federal government, and just register them as the long-term beneficiary (having the sweet but not the sour) will enhance governmental commitment and support instead of increased involvement and regulations.
Depending on the place where countries are listed on indexes like Corruption Perception Index, Country Credit Ratings, etc. the cost of funding infrastructural projects can be rather high for federal governments of developing countries. Under political pressure decisions can be made that in the long run will bring more evil than good: e.g. barter-transactions with local minerals against road construction that later turned out to be very unfavourable, giving infinite sovereign government guarantees whereby the financial risk is transferred to future governments and generations.INTINCO has the possibility to fund large infrastructural projects without the financial involvement of local governments or obtaining sovereign guarantees.
The involvement of friends appointed as (sub-)contractors or to prefer the combination ‘low cost/more risk’ above ‘no risk/higher cost’ eventually results in disasters. INTINCO does not want to compromise when it comes to quality and expertise. The knowledge and expertise of contractors must be beyond any doubt and a proven track record of successful realization of governmental project construction presented.
d) Business approach
No one will get a license to unlimited spending. Projects will be evaluated on their financial merits whereby the revenues, the construction cost and the operational expenses will be taken into account. In case that the economic feasibility of certain projects cannot immediately – or not at all – be accomplished (like the road construction; street lights, etc.), the payments for construction cost must come from other infrastructural projects where revenues clearly can be achieved (like power generation; transportation of utilities like gas, drinking water, electricity, telephone, etc.).
Another important aspect is that “nothing will be available for free”, for if so the value of the delivered services or products will be considered to be low/cheap and the wrong attitude might come up.
e) Limiting risks
High risks always results in higher costs, for suppliers will adjust their margins to the rate of risk they will encounter when starting a project.
INTINCO has developed a quintuple risk reducing strategy:
- Get the government involved and let them benefit when projects will be realized according to plan. It is important that a clear and understandable presentation must be made, explaining how their support will influence the outcome and that as a result more benefits will be available for them.
- Work only with premium contractors and partners and make them directly responsible for the outcome of their work. Major (public) companies leading in their field of expertise cannot afford to commit mistakes or to be involved in failures.
- Foreign operational project management by experienced managers, not only during the start-up phase but as long as projects need to be managed.
- Cover the political risks by obtaining a project guarantee from MIGA (Multilateral Investment Guarantee Agency), a department of the World Bank specialized in furnishing these kind of guarantees and having the power and influence to call local governments to order if needed.
- Cover the commercial risks by using large commercial insurance companies.Dividing the political and commercial risks and involving risk covering parties that are familiar with these respective risks areas, will increase risk coverage and lower the cost of insurance.
f) Social Footprint
It must be obvious to all parties involved that these projects must be imbedded into the local communities and local economies as much as possible:
- Local workers must be chosen above foreign labour. Whenever expertise is not available special training courses and internships must be developed where talented local workers will learn and be prepared for taking on management tasks in future.
- All projects must be realized and will be operational in the most durable way. Environmental awareness (presently minimal because local citizens might still be involved in a struggle to survive) should be propagated. Key will be to make the residents proud of their country, their region and their heritage and everyone should be dedicated to protect this.
- Health is another important aspect. Not only does this mean safe and secure working procedures, but also to arrange medical support for the workers and their families. When available, these medical services should also be used to help other poor local citizens.
Unfortunately, many developing countries are ranked very low on the Corruption Perception Index. It is needless to list the results or disadvantages what corruption will do to a specific country and its people. INTINCO does not want to get involved or be related in any way or form to corruption. Our company policy and the guidelines for our employees are clearly described in our Code of Conduct.