Why should we talk about public infrastructure projects today?

Judging from the experience of global economic crises, public infrastructure projects could be a way to encourage and stimulate the economy. In his economic theory, the famous economist John Maynard Keynes emphasised that the implementation of public investment and infrastructure projects could boost the economy. His idea that the government should even pay for digging a hole in the ground and filling it up again caused quite a stir during the Great Depression.

Obviously, this is just an intriguing comparison, highlighting the importance of public investment in stimulating the economy. However, public infrastructure projects during an economic downturn can help to inject money into various economic sectors, create new jobs and generate economic and social benefits.

According to estimations, the socio-economic return on infrastructure investment makes up as much as 20% – this means that in the long run, every euro invested in infrastructure can generate a 20% return on the country’s gross domestic product. Both the United States and China have already announced allocating substantial amounts of money for public infrastructure projects.

The Government of Lithuania has prepared an economic promotion plan which, among other things, focuses on economic promotion through the implementation of infrastructure projects.

The plan envisages the acceleration of investment programmes by speeding up payments and intensifying funding; using all the funds of the climate change, road maintenance and development programmes and accelerating the renovation of apartment buildings, setting an additional limit of state guarantees in order to create or enhance the existing financial instruments, with the state assuming the main risk. From the start of the lockdown the government, as part of the first phase of economic promotion, approved the allocation of 70 million euros for the modernisation of street lighting, the installation of solar power plants, transport infrastructure, the installation of pollution control devices and other areas of infrastructure.

The provided measures are acceptable and show the government’s aspiration to stimulate the economy through the implementation of infrastructure projects. However, it should be emphasised that there are some conditions that the public sector should consider to ensure that the planned investments are used efficiently and deliver the desired benefits.

Initially, it is necessary to continue and efficiently complete the infrastructure projects that already started. Currently, the public sector has announced several major infrastructure projects; however, the procurement procedures of these projects have not yet been finished. These projects include the project of the Ministry of National Defence on the construction of three new military units, the project of the Ignalina Nuclear Power Plant on the construction of a radioactive waste repository, the project of the Klaipėda Seaport on port gate breakwater, the project of ESO on smart electricity meters and others. Moreover, the project of the national stadium, which has become a project of the century and a symbol of the nation’s disappointment, deserves a special mention. The implementation of such projects during the crisis would not only stimulate the economy but also increase public confidence in the state and boost the overall social morale.

When faced with a dilemma which projects should be implemented, the public sector should focus on infrastructure projects that have the potential to create the greatest socio-economic and financial benefits for society and the state.

Among such projects could be the abovementioned energy efficiency projects, such as the renovation of central and local government buildings and the modernisation of street lighting systems, which, although still being developed, have much greater potential and opportunities. Estimations and experience show that the modernisation of lighting systems may allow the countries of the former Soviet bloc to save up to 80% of the electricity used for lighting – these savings could be used to cover capital investments. However, even major Lithuanian cities have not all fully modernised their lighting systems to this day.

It is worth to mention road infrastructure projects, including the introduction of digital traffic control and road charging systems. The discussion about the electronic system of truck taxation in Lithuania has been going for nearly 5 years, but the bureaucratic procedures are stalling the adoption of necessary solutions. According to various data and extensive experience of foreign countries, the introduction of the electronic road taxation system would allow significantly boosting the state budget with a tax paid by foreign freight carries using Lithuanian roads in transit. Notably, foreign freight transport makes up the largest part of all Lithuanian freight traffic.

There are also projects promoting the use of renewable resources (for example, the development of a network of electric car charging stations, the use of renewable resources in the public sector, the development of offshore wind energy, the modernisation of networks to improve electricity quality and network capacity for renewable energy projects), innovative technology infrastructure projects (for example, the digitisation of the public sector, the solutions of artificial intelligence in the public sector, robotics and related infrastructure). The initiatives of the public sector could make a significant contribution to these projects.

Finally, when a creative and non-standard approach is required to deal with the economic downturn, projects that are often considered utopian and even ridiculous are likely to become relevant. The Law on the Implementation of the Metro, which entered into force at the beginning of this year, provides for the implementation of the metro system projects, including a surface or underground rail transport system, usually in the form of a metro or tram. For some time now, there has been talk of a new airport, and the discussion is being held about the outer seaport in Klaipėda, which could be implemented following the example of neighbouring Gdansk. Wouldn’t it be wise for the public sector, together with private business, to take a notice of theses far-sighted and bold projects in the time of hardship?

During this period, the public sector should consider not only large infrastructure projects, which often require a high level of preparation and time but also medium-sized projects, which have great economic and social potential and can be implemented quickly.

This is particularly relevant for projects implemented by municipalities, such as the renovation of public buildings, the construction of sports facilities or the projects of road infrastructure. It is very important that the state contributes to the funding of these projects and allocates additional funds for their implementation or enables municipalities to borrow funds more easily and flexibly.

The public sector should cooperate more closely with the private sector in the field of the implementation of public infrastructure projects, especially at the project idea stage, to facilitate private business initiatives. The state could also support private infrastructure projects that create social value, such as therapy and health, sports, tourism projects. It is very important to facilitate bureaucratic procedures, including procurement procedures, especially in public-private partnership projects.

At present it is necessary to encourage the active involvement of state institutions, such as the Central Project Management Agency and the Public Investment Development Agency, which have extensive experience in implementing public infrastructure projects. The participation of these institutions ensures a healthy and result-oriented approach, the smooth and efficient implementation of the necessary procedures, the harmonisation of government and private sector interests and the selection of suitable partners for the implementation of such projects.

In conclusion, the implementation of public infrastructure projects in the times of economic hardship provides many opportunities for the public sector, including the opportunity to stimulate the economy and contribute to the implementation of projects that are beneficial and vital for society. Let us hope that Lithuania will take these opportunities.

Partner Marius Embrektas, Head of public-private sector partnerships, infrastructure and regulatory practices

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