
The investment functions include the decision to invest, the financing of the investment, project design, and implementation of the investment.
The decision to invest: The asset owner decides whether to invest and in what type of I&D: individual or collective, large or small, and so on. In large collective I&D systems, the decision is public, based on farmers’ demand explicitly or implicitly taken into account in a cost-benefit analysis where economic and social benefits usually outweigh construction and environmental costs (economic rate of return, preferably embodied in a multi-criteria analysis). In private I&D systems, the decision criterion is purely financial (return on capital).
Financing the investment: The decision to invest is dependent on the availability of adequate funding through self-financing, bank or other loans, government subsidies, or a combination. Usually, the owner of the future assets exercises this function, although the task of putting together the financing package may require professional assistance either in the form of a limited service provision or a complete function outsourcing. Three particular aspects of I&D financing affect this function - and have been the main reasons for the predominance of public financing. First, although costs may be very low for simple individual investments, many I&D projects can be very costly, depending on how much water is to be mobilized and the length of water conveyance and distribution system required. A large irrigation development can cost billions of dollars. Second, the length of the payback period is very long(15 to 25 years or more). Third, there are considerable political, economic, and social risks associated with investment in I&D for smallholders - for example, the risks associated with cost recovery by poor farmers.
Project design: Once the decision to invest has been made and funds are available, the owner of the future assets faces the task of designing the project.
Project implementation: Once decided, financed, and designed, the I&D project can be implemented, with a distinction between work execution and supervision.
Ref: Emerging Public-Private Partnerships In Irrigation Development and Management, World Bank Water Sector Board Discussion Paper Series, Paper No. 10, May 2007.
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