The ADB publication “Infrastructure Asset Management: Can the Canadian Municipal Experience Help Inform Better Practices in Southeast Asia?” shares Canada’s struggle to maintain its infrastructure and ensure that they continue to serve its community has pushed the country to adopt and implement infrastructure asset management.
As a young country, Canada shares the same experiences as Southeast Asian countries like the Philippines, Vietnam, and Indonesia, particularly their struggles to meet service demands amid funding constraints.
The report says that “Canada is experiencing the same urbanization trend as other Local Government Units (LGUs) globally, so the pressure on local infrastructure, to serve this growing population, is increasing.”
This may sound like a daunting task, but positive developments recently can offer valuable lessons to emerging economies, especially in Southeast Asia.
Canada’s development of infrastructure asset management in their LGUs stems from a government regulation (Public Sector Account Board) requiring LGUs to account for their tangible capital assets. Compliance with the PSAB served as a foundation for Canada’s comprehensive asset management program.
The PSAB stipulates that “LGUs must know their assets, the value of their assets and the remaining life of the assets.” This knowledge will allow them to identify their infrastructure deficit and develop long-term plans to address it.
Case study- the City of Fredericton and its Experience with Asset Management
The City of Fredericton has 56,000 people, with more than 100,000 living in the Greater Fredericton area. The city is well-known for its well-kept and managed infrastructure, reliable and safe water systems, and a water system that meets all standards.
However, the city lacks a comprehensive accounting system for its capital assets and a guide for prioritizing infrastructure investment. This led the city to put together its formal asset management system in 2005 to comply with the ISO certification.
A significant step in the city’s move to a formal asset management system is its adoption and compliance with the Public Sector Accounting Board (PSAB) in 2009. Compliance with PSAB led the city to do an initial valuation of all their tangible capital asset, which was initially a big task for all the departments involved.
Valuation of their assets allowed them to know all the essential data of their assets, such as size, location, the year it was built, and initial capital costs. Then they determined the lifecycles of each asset.
With the initial valuation and lifecycle data available, the next step was to develop the residual value of each asset, which can now be included in the city’s financial statements.
Data created through the implementation of an asset management system helped the city allocate infrastructure funding.
Benefits of Better Asset Management
As seen in Fredericton city, having a thorough understanding of all their infrastructure assets allowed them to know their assets’ value and deficits. Knowing their infrastructure deficits helped the city create a long-term financial plan with asset management vital to this plan.
The Fredericton city’s move to a formal infrastructure asset management system has also improved its communication with the public about infrastructure spending. The public seems willing to accept increases in rates when they understand why it is necessary.
It has also increased the public trust that their infrastructure is well-maintained, and they can rely on their LGUs for a safe and quality infrastructure and service.
Asset Management in Southeast Asia
Field observation in Southeast Asian countries like the Philippines, Vietnam, and Indonesia shows a lack of comprehensive asset management systems and overall long-term plans to address infrastructure service demands and problems with funding constraints.
The report says that without an infrastructure asset management in place, LGUs in developing countries will struggle to priorities investments and identify profitable infrastructure projects that can attract funding from the government and other resources.
According to the report, Southeast Asia’s rapid urbanization and growing infrastructure deficit make for an ideal situation to establish a comprehensive asset management system.
Having an infrastructure asset management in place will allow Southeast Asia’s LGUs to experience the same benefits Canada LGUs did.
The underlying principles for asset management are the same for both regions; however, Asia Pacific has a much deeper need for the system because of the continuing flow of migration from rural to the urban centers, adding more pressure to its infrastructure.
Proper asset management in place will avoid higher costs in the future.
The report also shares an observation in Southeast Asia that is quite similar in Canada. Governments tend to focus more on creating new infrastructures than replacing existing ones beyond their useful life.
Politicians would like to be seen creating something new rather than just maintaining what already exists. The report says that a thorough understanding of LGUs assets and their conditions can prevent this error and direct funding where and when necessary.
The report also points to a lack of coordination in the construction and maintenance of municipal infrastructure as a major weakness in Indonesia, the Philippines, and Vietnam.
Asset management can be valuable as it can clarify the actual cost of infrastructure assets and point to the specific agency responsible for a particular asset.
Overall, although LGUs in both Canada and some Southeast Asian countries share the same infrastructure issues, generally, LGUs in Canada have better financial resources and skills to implement an appropriate asset management system. The reason for this is that the governments of Canada have taken a leadership role in this regard.
Climate change and is another case for an asset management system in Southeast Asia. The report says that for the region to mitigate climate change impacts on infrastructure, necessary changes must be made regarding infrastructure design and ensuring it meets the standard.
Finally, LGUs in Southeast Asia will need to have a solid plan to ensure that their existing and new infrastructure continues to respond to the needs of their citizens.