Significant social and economic benefits will be long-lasting only if infrastructure projects are scrutinised through a rigorous cost-benefit analysis, said a report published by the Dubai International Financial Centre (DIFC).

The report entitled "Infrastructure as an Engine of Growth in Mena and South Asia (Menasa) region, also examines the role of infrastructure in the growth outlook of the wider region that is poised to benefit from the integration of its national economies, demographic trends, human capital investment, and a wealth of energy resources.

"Countries that do not invest in or maintain their infrastructure are neglecting their future as well as their present, because investments constitute the fundamental driver of the economic cycle," said DIFC head economist Dr Nasser Saidi.

In the GCC, the main driver is an energy commodity windfall that for the first time in history is not merely amassed in offshore assets, but is increasingly deployed domestically to transform the Arabian Peninsula into an advanced 21st century knowledge-based economy.

The International Monetary Fund has recently raised its 2011 projection for GCC growth to 7.8 per cent from 5.2 per cent due to high oil prices which would boost the GCC's current account surplus growth by 124 per cent.

While in the GCC, infrastructure projects are anticipating the demand and actually stimulating it - the build it and they will come phenomenon - in the rest of Menasa, the existing infrastructure is heavily stressed due to poor maintenance, underinvestment and intensive usage.

"Investment in infrastructure leads to higher productivity growth and improved competitiveness," Dr Saidi added.

"This in turn translates into higher incomes and higher government revenues which subsequently lead to more public investment in a mutually reinforcing pattern.

"The success stories of China over the past two decades and the GCC since the turn of the century can be attributed as much to effective public investment as to export driven policies.

"In the process, other positive spill overs are felt in the form of learning-by-doing effects, efficiency gains in companies, human capital improvement, research and development in construction techniques, technology transfers as well as process innovation," he added.-TradeaArabia News Service