investing the additional resources in the second set of scenarios permits the government to improve the productivity of infrastructure investments.

Different scenarios have been developed to assess the effect of productivity gains related to the additional investment. These gains are modeled as an increase in the quantity of new capital that is produced from a given quantity of inputs, i.e. more can be produced with unchanged resources. This productivity gain can, for example, be realized by more efficient project selection and implementation or improved procurement processes that ensure competition. Given the current low efficiency in the management of government investment (cf. section 2.3), there is significant room for improvement.

The scenarios are therefore defined as described above: INF-FL, INF-BL, and INF-BL(15), INF-BL(30), INFBL(45). The scenarios assuming back-loading of investment are identical except for the suggested productivity increase.

The choice of productivity gain for the scenarios is linked to the achievable improvement in the internal rate of return (IRR) for infrastructure investments. A productivity gain of 1.5 percent in the base year, for example, implying that 1.5 percent more capital can be produced with a given input, will lead to an increase of the IRR by about 0.5 percentage points. The same productivity gain for ten years, however, would increase the IRR by more than 60 percent compared to the baseline. A productivity increase of 4.5 percent annually over ten years implies an IRR that is about four times as high as in the baseline.

The range of assumed IRR is in line with findings in the literature. Empirical data indicate that the IRR for government investment varies quite widely, but that values in the range of 15-20 percent are typical across a wide range of country categories (Foster and Briceño-Garmendia, 2010; Estache 2005; Prud’homme 2005; IMF 2008; and World Bank 2007). Values at the lower end may be expected for broader aggregates; for example, on the basis of a cross-country analysis for developing countries, Dessus and Herrera (2000) generate an average internal rate of return of 14.2 percent for aggregate government capital, a rate that is very similar to the return calculated for private capital, 14.9 percent. There is some indication that, for the period 2000-2003, returns from infrastructure investment in SubSaharan Africa and elsewhere were higher than in previous decades (Estache, 2005). Given the current low base of infrastructure provision in Congo, a higher than average IRR can be expected. In fact, estimates by Briceño-Garmendia and Foster (2009) yield an IRR ranging between 6 and 100 percent for isolated interventions and between 5 and 30 percent for country-level investments in the Republic of Congo.

Compared to the baseline, additional infrastructure investments lead to improvements in the macroeconomic situation for all scenarios (Table 5). This includes growth, private consumption and investment and trade indicators. Poverty rates and MDG indicators are also lower than in the baseline scenario (Table 6).

The results of the model show that delaying investments and improving their efficiency pays off. Higher growth rates and lower unemployment rates can be achieved when slightly delaying investment and simultaneously improving efficiency compared to frontloading investment with low efficiency. As described in section 2.3, Congo’s public investment management is far from being efficient. The brief delay in large investment projects could be used to improve government systems, especially in project 10