manage fiscal risks, do not formulate a multi-year budget, and have non-transparent procurement practices (Figure 19).

Box 1. The Risk of Failure of Megaprojects Infrastructure megaprojects, those that cost US$ 1 billion or more, are often considered crucial for the future of cities or countries. If done right, such investment (i) creates and sustains employment, (ii) contains a large element of domestic inputs relative to imports, (iii) improves productivity and competitiveness by lowering producer costs, (iv) benefits consumers through higher quality services, and finally, (v) improves the environment when infrastructures that are environmentally sound replace infrastructures that are not (Clegg _et al._ , 2017).

However, performance of megaprojects has been poor for the last 90 years for which comparable data are available, with a consistent history of cost overruns (see Table B.1) for both private and public sector projects. One out of 10 go over budget, with average cost overrun of 96 percent for dams and 45 percent for railways (Flyvbjerg, 2014). Only 1-2 out of 10 are delivered on schedule, and about the same achieve the expected economic and social benefits, with demand often below expectations. Successful megaprojects, typically defined as delivering the promised benefits on budget and on time are then approximately 1–8 in a thousand projects (Flyvbjerg, 2017).

Megaprojects are prone to “slow fail” processes, which makes it difficult to avoid higher costs. At the planning stage costs and timelines are systematically underestimated and benefits overestimated and there is no transparent and independent selection process. Megaprojects are often considered unique in their kind, with little attempt to learn from other projects.

|Table B.1. Cost Overruns in Selected Infrastructure<br>Megaprojects|
|---|
|**Project**<br>**Cost**<br>**overrun (%)**|
|Suez Canal, Egypt<br>1,900|
|Troy and Greenfield Railroad, USA<br>900|
|Furka Base Tunnel, Switzerland<br>300|
|Verrazano Narrow Bridge, USA<br>280|
|Boston’s Big Dig Artery/Tunnel Project, USA<br>220|
|Denver International Airport, USA<br>200|
|Panama Canal, Panama<br>200|
|Minneapolis Hiawatha Light Rail Line, USA<br>190|
|Humber Bridge, UK<br>180|
|Dublin Port Tunnel, Ireland<br>160|
|Montreal Metro Laval Extension, Canada<br>160|
|Copenhagen Metro, Denmark<br>150|
|Boston–New York–Washington Railway, USA<br>130|
|Great Belt Rail Tunnel, Denmark<br>120|
|London Limehouse Road Tunnel, UK<br>110|
|Brooklyn Bridge, USA<br>100|
|Shinkansen Joetsu High-Speed Rail Line, Japan<br>100|
|Channel Tunnel, UK, France<br>80|
|Karlsruhe–Bretten Light Rail, Germany<br>80|
|London Jubilee Line Extension, UK<br>80|
|Bangkok Metro, Thailand<br>70|
|Mexico City Metroline, Mexico<br>60|
|High-Speed Rail Line South, Netherlands<br>60|
|Great Belt East Bridge, Denmark<br>50|

Source: Flyvbjerg, 2017.

The execution phase is plagued by weakness in organizational design and capabilities, with actors changing over time and delivery methods reacting to unforeseen problems (often due to poor planning) and stakeholders with competing interests (e.g. contractors maximize payments and political sponsors eager to minimize costs). In addition, poor planning may impact on input delivery, land acquisition or other disputes, particularly frequent in multi-country infrastructure. Despite the scale of the project one issue is likely to block the implementation of the entire project and trigger penalties. Timely monitoring is also very difficult (McKinsey, 2015).

Most BRI countries would benefit from improved PPP regulatory frameworks. PPPs are widely used to design, finance, build and operate large infrastructure projects. Proper regulatory systems and government capacity to plan, procure and implement such projects are important for efficiency gains and to limit fiscal risks associated with large investments. Since 2015, the World Bank assesses regulatory frameworks for managing PPPs in client countries.<sup>48</sup> The assessment is organized across three main stages of the PPP project cycle: preparation, procurement, and contract management of PPPs.<sup>49</sup> The 2018

> 48 The exercise was designed after the WB Doing Business methodology.

> 49 Assessment of the legal and regulatory framework focuses on a highway transport project as a guiding example to ensure cross-comparability.  Methodology also examines a fourth area: the management of unsolicited proposals, not considered here.

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