Improving Transport Project Appraisals
In the Islamic Countries
1
Executive Summary
Background
Having its origins in the 19th century, with studies by the French Jules Dupuit from the Ecole
nationale des ponts et chaussées (National school of bridges and roads), project appraisal of
transport projects has the longest academic and practical tradition of public investment appraisal.
Standard assessment frameworks are now routinely applied worldwide by national and
international funding agencies to select and prioritise transport projects.
Despite the systematic appraisal exercise and substantial convergence on methodologies and
indicators to be used, literature shows that the actual performance of transport infrastructures
frequently differs from what forecasted ex-ante (Flyvbjerg, 2007). Different explanations have
been suggested to explain this divergence. A poor quality of the ex-ante assessment can be
identified as the possible root of the discrepancy. Forecasting errors or misled conclusions can
be caused by issues in the collection of relevant information; lacking data; failure to ex-ante
identify effects that end up being generated by the project; technical impossibility to include
certain effects in the analysis.
The literature however recognises other causes for the deviation between ex-ante appraisal and
actual project performance. Part of the problem derives from strategic misrepresentations by
project promoters and absence of incentives for both private and public sector to avoid optimism
bias and reveal true information about the project characteristics (Mackie, 1993; Flyvbjerg et al.,
2003; Florio and Sartori, 2010). In practice, project appraisal poorly performed, affected by
optimism bias or deliberately manipulated lead to high level of misinformation about costs and
benefits of project at the planning stage. This, in turn, affects the ranking of projects and lead to
inefficiency, because in terms of standard CBA decision makers are likely to implement inferior
projects (Flyvbjerg, 2007). In the same vein, ‘lock-in’ has been suggested as an additional
explanation, i.e. the adoption of suboptimal policies as a consequence of path dependency,
despite the availability of a better alternative (Cantarelli et al., 2010).
Funding decisions on public capital investments and project appraisal to inform the decision-
making process can be seen as a game with different players holding a variety of objectives,
priorities, capacities and interests. The disruptive interplay of self-interest maximising actors
may be mitigated or exacerbated by specific features of the institutional setting or the funding
mechanisms. When relevant actors do not have the right incentives to perform project appraisal
according to quality standards and to actually use its results in the decision-making process, the
results may be biased investment decisions. It is widely recognised therefore that some
conditions related to the institutional framework and the strategic approach to the use of project
appraisal can undermine the credibility of the appraisal itself.
The main objective of this study is to establish a conceptual foundation on the appraisal of
transport infrastructure projects in the Organisation of Islamic Cooperation (OIC) Member
States. The study is also expected to draw attention to the transport project appraisal practices