UNDENIABLY, infrastructural facilities contribute immensely to economic progress. There is no way for goods and services to move efficiently without a good infrastructural network in place.
This fact is often forgotten by many of us favouring to acknowledge the role of other factors, such as the availability of a good banking system and ease of doing businesses, among others.
Our nation has been right in investing much in this area so as to assist in the opening of our hinterland and in enhancing the connectivity of our urban system. Finally, our infrastructure helps to connect our production system to the global market place and bring investors to locate their businesses here.
Countries such as the United States have invested a lot in infrastructure, especially in its turnpike system, to bring about greater access to its remote areas, thus facilitating investments and businesses.
It is for this reason that our country has invested in ports, airports, highways, railway improvement and also rural roads throughout the various development plans.
In fact, the interest in investing in these areas is still strong that the authorities have to appraise the proposals very carefully to avoid over-investments. Despite that detail and scrutiny, there have been a few cases of government bailout of these projects, when the economy experienced significant slowdown. Although these investments are capital intensive and lumpy, they do have strong linkages with the economy during the construction stages, when demand for materials is large.
More importantly, these investments, once completed, change the landscape with their spillover effects; land values go up, industrial, commercial and housing projects emerge around them, and large plantations and smallholdings become possible ventures.
All these benefits can be measured and quantified, and incorporated in the social cost-benefit analyses and ex-post project evaluation, thus making them more viable in the longer run. Many of them, on pure financial terms, may appear less viable in the short term given their high cost and long gestation payback period.
Hence, in analysing projects of this nature, economists are more amenable than the financial accountants, in taking into account the various social benefits and costs, such as their positive and negative externalities. Financial analysts are largely interested in financial returns only.
In fact, the nation has enjoyed the stream of services provided by these infrastructural projects, long after their financial outlays have been recovered. Imagine the bottleneck in our logistics should these facilities not been built in the recent past, given our high level of international trade, estimated at 150 to 200 per cent of our total output.
It is with this perspective in mind that the Second Penang Bridge, now called Jambatan Sultan Abdul Halim Mu’adzam Shah, was initiated. It is to spearhead further progress and development in the northern corridor region.
The areas around Batu Maung and Batu Kawan have risen in value with new businesses being located in the vicinity, while the Balik Pulau area now has the potential for further development. Additionally, the bridge eases the congestion along the first bridge.
All these benefits, if quantified in monetary terms, will far exceed the amount of compensation the state government is asking from the Federal Government for its previous agricultural land that was used for this project. Other states have waived such compensation.
All these infrastructural facilities have integrated Malaysia, especially Penang, with the global economy, thus facilitating greater value-creation and spawning of new economic activities, which in sum total, augment gross national income.
There are other benefits from the construction of these infrastructural facilities. They give chance to Malaysian professionals, engineers specifically, to upgrade their skills, especially if the projects are complex and large-scale, such as the new terminal at the Kuala Lumpur International Airport, the Second Penang Bridge and the MRT.
In addition, the management of these facilities provides good exposure for our people to world-class asset management and supervision. These skilled professionals can be used as part of Malaysia’s services exports if they are managed and packaged well as international consultants in airport, bridge, and highway construction and maintenance to the region and beyond.
Interestingly, China has been active in using its abundant foreign reserves to give long-term loans to emerging nations for the construction of infrastructure. Although Malaysia does not have similar capacity, it can export its professional services to many countries after having acquired much experience in infrastructural development.
Having said the above, rather obvious to many, I think Peninsular Malaysia is already well served with infrastructure. The concern now is how to implement more roads, highways and bridges in Sabah and Sarawak. The many tragic cases of boat mishaps there call for more roads and bridges.
Perhaps a long-term master plan for these types of projects can be established to help plan the locations and timing of such public investments and their estimated costs. Would not the next development plan be a good starting point?