Sat | Dec 5, 2020

Editorial | Let’s debate special infrastructure fund

Published:Sunday | November 22, 2020 | 8:21 AM

With little in the treasury to pay for a major rehabilitation of Jamaica’s devastated roads, it may be timely to revisit the idea, as E. G. Hunter believes should be the case, of a special fund for that purpose.

“If you examine places like New Zealand, Australia, Canada, and Japan ... , road maintenance and reconstruction is funded by way of a dedicated fund that does not depend necessarily on the … (economic) health of the country,” Mr Hunter told Parliament’s Infrastructure and Physical Development Committee last week. “So long as people purchase gas (petrol), a percentage would go towards road maintenance. It is the preferred model, rather than what obtains now.”

Mr Hunter is the CEO of the National Works Agency (NWA), the Government’s quasi-independent body that has responsibility for the construction and maintenance of major public infrastructure, including, according to its website, 5,286 kilometres of arterial roads, or approximately 35 per cent of the island’s more than 15,000 kilometres of paved roads. Of these many kilometres are “community” and farm roads.

Many of the island’s important roads and their supporting infrastructure, such as bridges, retaining walls, and culverts, were severely damaged in recent weeks by floods and landslides associated with passing storms. But even before the weather events, roads were mostly in poor shape. Indeed, Mr Hunter told the parliamentary committee that 55 per cent of those under his jurisdiction were in “a bad condition”. Many others are poor. Some are fair. Very few are good.

Conventional wisdom, and, therefore, much of the debate about the state of Jamaica’s thoroughfares has been on the premise that they are badly engineered and constructed. And that has largely been put down to corruption. Which, in some instances, may be the case.

The Real Issue

Mr Hunter, however, insists that this focus is to misdiagnose the problem. The real issue, he argues, “is gross underfunding”.

For instance, the NWA pointed out in documents to the committee that over the past three fiscal years, the current one included, its budget for infrastructure maintenance was cut by nearly 40 per cent – to J$3.8 billion from J$6.2 billion. In such circumstances, it is near impossible to follow the global benchmark of, say, doing major rehabilitation of a road after its first seven years of life, followed by another overhaul seven years later, and reconstruction in the 20th year.

“We react to events, rather than have a preventative ethos,” Mr Hunter told the parliamentary committee.

It’s the money, stupid! Or the lack of it. Hence, our support for, at least, a serious debate of the potential efficacy of a special infrastructure fund as canvassed by Mr Hunter.

There used to be one for roads – the Road Maintenance Fund (RMF). It was around for 15 years until it was scrapped three years ago. Its cash was mingled with general revenue via the Consolidated Fund. The Holness administration has argued that maintaining these segregated funds is inefficient, which, increasingly, was the position of its predecessor.

Established under a 2002 law, the RMF was funded by a third of the revenue collected from motor vehicle licences. It also earned interest and investment income. The RMF could also borrow, which it did once from the similarly now shuttered PetroCaribe Fund, which used to manage the long-term, low-interest loans Jamaica received under an oil payment rebate scheme with Venezuela.

The inflows from motor licences, however, weren’t sufficient to be transformative in the financing of road maintenance and related infrastructure projects. At the time of its closure, the RMF had less than J$4 billion in its kitty. Mr Hunter, though, alluded to an additional, and potentially more sumptuous, source of income: the tax on petrol.

According to the science, energy, and technology ministry, Jamaica’s road and rail transport consumed over 7.22 million barrels of petroleum – six per cent more than the previous year and 34 per cent of overall oil consumption – in 2019. There is no breakout in the available data of the value of petroleum consumed by the transportation sector. But the overall oil-import bill, excluding the bauxite industry, was US$1.46 billion. In the immediate absence of details, the costs of the various types of petrol imported for transportation, a very crude analysis, using 34 per cent of the overall bill, would suggest an expenditure of nearly half a billion US dollars. Further, last year’s Zacca report on the future of the Government’s Petrojam oil refinery estimated that up to 36 per cent of the price Jamaicans pay at the pumps for gasolene and diesel is Government taxes.

A discussion of Mr Hunter’s idea should consider not only the level of inflows and how a petrol tax could contribute to an infrastructure fund, and the downside thereof, but what might be its impact in dissuading the use of private vehicles and its likely contribution to policies that encourage a good public transport system. A corollary to this is how taxes on petrol and a good, organised public transport system might lessen wear and tear on Jamaica’s roads, and thus the pace of their deterioration.